IBM's sales drop for seventh quarter as it forgoes bonuses

  • Article by: ALEX BARINKA , Bloomberg News
  • Updated: January 21, 2014 - 7:31 PM

The company is said to be working on selling its low-end server business. Top executives won’t take bonuses.

IBM Corp., the world’s biggest computer-services provider, reported a seventh straight quarterly sales decline amid plunging demand for servers, prompting top executives to forgo annual bonuses.

Revenue fell 5.5 percent to $27.7 billion in the fourth quarter, the Armonk, N.Y.-based company said Tuesday. That missed the $28.3 billion projected by analysts, according to data compiled by Bloomberg.

Technology buyers are increasingly storing data and software on cloud-computing networks, rather than onsite, limiting their need for servers, mainframes and other hardware. To cope, Chief Executive Ginni Rometty is offering more cloud services, eliminating jobs and divesting lower-margin businesses. Though these efforts are making progress, last year’s results led Rometty to opt against bonuses, she said.

“In view of the company’s overall full-year results, my senior team and I have recommended that we forgo our personal annual incentive payments for 2013,” she said.

IBM’s shares fell as much as 4.2 percent to $180.50 in late trading after closing at $188.43. The stock declined 2.1 percent last year.

Even so, the company exceeded profit estimates last quarter, helped by the cost cutting and software growth. Excluding some items, earnings climbed to $6.13 a share, IBM said. Analysts had estimated $6 on average. The company, which is targeting adjusted earnings of $20 a share by 2015, said Tuesday that it remains on track to reach that goal. IBM projected at least $18 a share in operating earnings for 2014, in line with estimates.

IBM is negotiating a sale of its low-end server business to Lenovo Group Ltd., according to a person with knowledge of the deal. The deal, which would make IBM less reliant on hardware revenue, may be signed within weeks, the person said.

In the meantime, the company has sought to boost efficiency by cutting jobs. IBM said Tuesday it expects to post about $1 billion in “workforce rebalancing” costs in the first quarter, following a similar charge last year.

Rometty is seeking to benefit from a shift to cloud services, which are delivered online rather than via local computers. Cloud revenue rose 69 percent last year to $4.4 billion. Revenue from IBM’s systems and technology business, which sells mainframes, servers and other hardware, fell 26 percent to $4.26 billion in the fourth quarter.

  • get related content delivered to your inbox

  • manage my email subscriptions

ADVERTISEMENT

Connect with twitterConnect with facebookConnect with Google+Connect with PinterestConnect with PinterestConnect with RssfeedConnect with email newsletters

ADVERTISEMENT

ADVERTISEMENT

ADVERTISEMENT

ADVERTISEMENT

ADVERTISEMENT

ADVERTISEMENT

 
Close